So, next time the topic comes up, jump on a browser and visit numbeo.com. It’s a crowd sourced treasure trove of cost-of-living stats from around the world.

Type in your city. Palo Alto, California in my case. See what the crowd cites as the average price for everything from a head of lettuce ($3.00) to a gallon of gas ($3.11) to the monthly basic utility bill for a 915 square foot apartment ($137.22). On the income side, you can see the average monthly salary ($6.500).

So how does that compare to, say, Des Moines, Iowa? Look for the comparison field toward the top and type in Des Moines.

That head of lettuce in Des Moines? Just $1.76. Gallon of gas? Just $2.19. Utility bill? $114.26.

In the summary indices section near the top, you’ll see that rent in Palo Alto is 228.9% higher than Des Moines. Restaurant prices? 13.6% higher. Groceries? 6.8% higher.

Note, however, the average monthly disposable salary is also higher in Palo Alto — by 203%.

Maybe you should encourage your kid to learn to code and move to Des Moines to optimize that delta between expenses and wages!

Take some time to explore comparisons between your city and others in the US. Try other countries too. (Rent prices are 1,082% higher in Palo Alto than in Bangalore, India!)

Numbeo is a fun way to give your kid a clue about how much life costs — at home and elsewhere.

P.S. Is Numbeo accurate? Hard to say, but if it’s even remotely in the ballpark, your kid will gain some valuable perspective. Ready for the next step? Try this reimbursement strategy to let your kid experience the numbers directly.

Tuesday, August 30, 2016

A semester later, I discovered computer science. I landed my very first C ever in that class. I was humbled and angry. But I was also hooked. Controlling a machine with code was pure magic to me.

In 1981, I traded my tennis racket for a computer keyboard and never looked back.

In retrospect, it was the smartest financial decision, short of marrying my wife, that I ever made. It’s funny how some of our smartest long term financial moves aren’t motivated by money at all.

From the day I stepped out of college until 10 years ago when I founded FamZoo, I was compensated generously for something I absolutely loved doing. And that’s one of the key reasons I’ve been able to combine my beloved craft with an important social mission for the last decade without accepting a dime of monetary compensation.

According to a recent study by a software trade group, there are 223,054 open positions for software developers in the US. Those openings span every state with no slackening of demand in sight. The average salary for software developers nationwide tops $104,000. That’s nearly a quarter million opportunities for people to follow a trajectory of financial security and professional fulfillment if they discover a passion for software like I did.

As Marc Andreessen says, “software is eating the world.” It has relevance in virtually every field — from art to genetics.

So if you have any opportunity to expose your kid to writing software. Do it. There’s no downside. Who knows? Your kid just might love it. Just like I did.

P.S. There are only a handful of new tennis players who crack into the financially viable tier of the pro circuit each year. I think I made the right call.

Monday, August 29, 2016

I used to feel a little guilty when one of my five kids would call me out on “inconsistent” treatment when it came to shaping their money habits.

Before long, I realized that my kids were the ones who were “inconsistent.” Despite the same parenting — as far as we know — each had their own unique personalities. What was good for the goose wasn’t always good for the gander. We found it was more effective to devise habit building techniques that were consistent with their individual personalities, not just blindly consistent across the board in the name of “fairness.”

That squares with the research and thinking of Gretchen Ruben, author of the book Better Than Before. The book deconstructs the secrets to making good habits and breaking bad ones.

Gretchen finds that habit forming strategies are not one-size-fits-all. The best fit depends on an individual’s tendencies toward responding to expectations. In her book, an individual is either an Upholder, an Obliger, a Questioner, or a Rebel.

An Upholder or an Obliger will often respond well to an external expectation or reward to shape a solid money habit. A Questioner might — after a detailed discussion. A Rebel won’t. Learn more in Gretchen’s excellent discussion with Paula Pant on the Afford Anything podcast.

Take Gretchen’s online test.
Which one are you? Take the test in the shoes of your kids. Which ones are they? Is everybody the same, or different?

I’m an Upholder according to the test results. Between my wife and the five kids, we have members in all four buckets.

What’s the point when it comes to helping your kids build good money habits? Know your kid first. Pick the strategy second. Picking one approach just for the sake of consistency with other kids (or your own upbringing) may not be fair after all.

Sunday, August 28, 2016

What do teens think should be in their wallets? Cash back from more spending of course!

Can you blame them? Cool guy Samuel L. Jackson has been not-so subliminally feeding them that message for years.

When it comes to cards and reward programs, all teens hear is spend more, get more.

Spend more, get more points. Spend more, get more rewards. Spend more, get more cash back.

Parents know it’s just a seductive marketing lie. The reality for most people — especially those in a fragile financial state like many young adults — is spend more, get more debt.

Time to de-program our teens.

Time to create a parent-financed debit card reward program that encourages teens to spend less, not more.

How? Offer your teens an aggressive parent-paid interest rate on their bank or prepaid debit cards as a bonus for not spending. Just multiply your awesome rate times the current balance each week or month, and credit it to your teen’s card.

Saturday, August 27, 2016

There will be obvious signs your teen wasn’t ready for a checking account.

The $35 overdraft fee.

The bounced check.

The $10 monthly service fee for dipping below the minimum balance.

Jumping from just using cash to using a checking account is like jumping from a tricycle to a 33 gear road bike.

So how do you know when your teen is ready for checking? What’s a good interim proving ground?

A low cost reloadable prepaid card. Choose one with no fees on declined transactions and no other hidden fees.

Then challenge your teen to pass the No Decline Challenge: go for six or more months making regular purchases without a single transaction being declined for insufficient funds. A sterling record will prove your teen knows how to monitor and manage an account balance effectively.

To make it challenging, your teen should have at least one recurring subscription that hits the card at regular intervals. (It could also be an internal family billing for a share of the family’s cell phone plan.) Why? Avoiding a decline for a scheduled billing requires some planning ahead to make sure enough funds are in place each time the charge hits.

And if your teen gets tripped up by a decline? Just reset the clock.

What if you decide to stick with the prepaid card beyond the six months? Just turn the No Decline Challenge into a regular No Decline Bonus. Move a few bucks on the card every time 30 days elapses with no declines.

Whether it’s onward to checking or onward to bonuses, the No Decline Challenge will turn your teen into a balance managing baller.

Wednesday, August 24, 2016

Boom. Equipped with a card (hopefully not your card!), Internet access, and a few seconds, that’s all it takes for a teen to complete an impulsive and often regrettable purchase.

Time to institute the Abandon Cart Rule. Coach your teen to pause before completing checkout for a sizable purchase. Abandon the loaded cart. Step away from the site. Come back and resume checkout the next day.

Why?

Slow down the purchase decision. Force a little reflection. The bloom may come off the rose in the light of a new day, and the cart can stay abandoned.

If not, there can be an added bonus to waiting a day or more to check out. Sometimes eCommerce sites will email a discount coupon to holders of abandoned carts — especially new customers. (In fact, I just scored a 15% discount that way today. Sweet deal.)

Also, be sure to have your teen Google the name of the ecommerce site or brand plus the keyword “coupon.” There might be other discount codes lurking on the web that can be applied at checkout.

Tuesday, August 23, 2016

There’s one financial asset that every teen has an equal opportunity to grow and protect: a reputation. Unfortunately, many teens don’t make the connection between reputation and financial well-being until it’s too late.

A consistent track record of reliability, honesty, and diligence translates directly into increased earning power. Anyone who’s hired an employee or contracted a service knows that truth.

Yes, knowledge and skill are important, but employers and customers place enormous value on a solid reputation. And a bad reputation can overshadow even the most exceptional capabilities.

A solid reputation can take years to build, and just seconds to destroy. Your golden financial asset can drop to zero in a heartbeat.

Sadly, the Games of the 31st Olympiad showcased an extreme example. Ryan Lochte built a golden reputation over 32 years of athletic discipline and achievement. He rightfully parlayed that reputation into millions in financial security through decade long relationships with top-tier sponsors like Speedo and Ralph Lauren. He destroyed that multi-million dollar asset in one night of partying and deceit in Rio.

That’s an important cautionary meltdown for your teens to see before that next edgy social media post. That next overindulgence. That next half-truth. Stop. Think. What you’re about to do or say — is it really worth it? Ryan found out the answer the hard way.

Remind your teens to guard a reputation like the valuable gold that it is.

Monday, August 22, 2016

Staying in the nest has recently become the most common living arrangement for young adults.

According to Pew research, the 32.1% of 18- to 34-year-olds living in a parent’s home now just edges out the 31.6% who have the second most common living arrangement — living as a married partner or co-habitant in one’s own household.

Meanwhile, separate research shows that 29% of the young adults in that same age group are not saving any money month to month.

Living at home as a young adult. Not saving. That’s a bad, bad combo.

You could collect a stiff rent, but that defeats the purpose of coming back to the nest in the first place.

An alternative deal to consider depending on circumstances: require a significant monthly payment toward reducing credit card or student loan debt. Once the debt is paid off, you can switch over to the retirement contribution rule.

The bottom line: If your young adult kids are staying in the nest rent-free now, they better darn well be building up a nest egg for later.

Since you control the currency, you control the exchange rates. Maybe one Dad Dollar equals 15 extra minutes on the computer. Maybe 1 Mom Dollar equals an outing to the ice cream parlor for a single scoop.

Make a little redemption chart with rewards that make sense for your kids. Focus on experiences and time spent together.

As for the currency, here’s how you can print up a few of your own custom Mom/Dad dollars. Start with your own copy of my Mom/Dad Dollar template in Google Docs by clicking
here. Then:

Saturday, August 20, 2016

It’s inevitable that your newly minted teen will start making outings to the local fast food joint with friends. Like it or not, teen fast food junkets are a classic rite of social passage. (Relax. There are worse ones for sure!)

In fact, our FamZoo data corroborates the transition. Fast food jumps from the third most popular category of spending at 9% of transactions for pre-teens to the most popular category of spending at 22.1% of transactions for teens. Brace yourself.

Since you’ve probably learned the wisdom of picking your battles with teens by now, a ban on the fast food outings probably isn’t your best bet. But setting some reasonable boundaries is always a good idea.

The problem is, you’ve been eating so healthy lately (right? ahem!), you can’t remember what a reasonable fast food budget is. So we’ve collected some stats to help you. As you can see from the chart, the monthly average has hovered between 6 and 7 dollars for the last 8 months.

Given the data, calculating a budget around $6.50 per outing seems reasonable.

That said, if you’re still determined to squelch your teen’s fast food habit altogether, you could just use the data as your benchmark figure for the brown bag lunch bribe.

Thursday, August 18, 2016

Does the tiny scratch on the case really matter? Cover it with a sticker.

Does matching the latest memory and CPU specs really matter? Not for browsing, homework, and Facebook.

Does the extra 2.1 inches of diagonal high res display really matter? Not for watching YouTube and Netflix.

Does it really have to be shiny and new? Not if the focus is on real requirements and value instead of vanity. Vanity is like a tax.

Your kids will learn these truths if they live them.

The next time your child has a legitimate need for an electronic device, go the refurbished route:

Find a reputable source. See if the desired manufacturer sells refurbished equipment directly (Apple does), or try a reCommerce site like Gazelle.com. Google around for reviews by others who have used the service.

Check the inspection process, return policy, and warranty options. There’s always some risk with used equipment, so make sure there are solid assurances of quality and a reasonable return policy for defective devices.

Cash in on your old device. At minimum, you can responsibly recycle your old device. At best, you can get paid for it. See if you can earn credit or cash for a device that meets reuse standards.

Share the savings. To sweeten the initial bitterness, consider letting your child pocket a fraction of the difference between the refurbished item and a comparable new one.

Let your child learn firsthand that getting the job done doesn’t require the leading edge of technology. Most times, the slightly trailing edge is more than adequate. And a much better value.

Help your kids kick their obsession with latest shiny gadget, and they’ll be accumulating shiny coins in their bank accounts instead.

Wednesday, August 17, 2016

“Dad, can you be a cosigner on my apartment lease? They said I’ll need you because my FICO is under 620. Oh, and Dad, what’s a FICO?”

Renting an apartment is often the first financial transaction your teen encounters that relies a credit score. Don’t let that be your teen’s first introduction to the term “FICO.”

Educate your teen about the most widely used credit score ahead of time. To make it memorable and engaging, walk your teen through a familiar, real world example. Your own score.

Haven’t checked it lately? These days, you might be able to get your FICO score free from your credit card company or bank. Otherwise, you can get it free from Discover — whether you’re a customer or not. Just visit creditscorecard.com. (Be sure you’re comfortable with the privacy policy and terms first though.)

With your latest report card in hand, step your teen through each of the five categories that contribute to your score. Explain how your financial decisions have impacted each:

Credit Mix (10% of score): “No real message for you here. Showing that I can handle different types of debt — a credit card, a mortgage, a car loan — makes me look like a better credit risk. But I wouldn’t want you to take take on unnecessary loans here to try to goose your score. Besides, this is the least important category of the five.”

New credit (10% of score): “Hmmm, I shouldn’t have opened a new credit card, shopped around for home loans, and taken on a car loan all at once. All that new debt activity makes me look a bit desperate financially.’

Length of credit history (15% of score): “Churning those credit cards early on to chase points wasn’t such a good idea. It would have been better for me to just hold on to one card consistently after I got out of college. Then I’d appear less risky.”

Payment History (35% of score): “Ouch, that one medical bill that we forgot to pay went into collections recently and really hurt us. Mom and I need to be more organized here.”

Why not come clean on your FICO score to your teen? Your teen will learn valuable lessons from your mistakes or be inspired by your stellar record. Either way, the sooner your teen understands how a FICO score works, the sooner your teen can move out of the house. Bonus.

Tuesday, August 16, 2016

Me: “Would you be willing to pay a 14.2% tax every time you wanted to get a little cash out of your account?”

My 14 year old son: “No, that would be ridiculous.”

Agreed.

So, why is it that the majority of kids using FamZoo prepaid cards are doing just that? I ran the numbers today. A whopping 78% of the ATM withdrawals made by kids in the last 90 days are paying an average of $2.84 in unnecessary ATM fees. That’s 14.2% of a typical $20 withdrawal!

Ridiculous indeed.

I have to assume it’s because parents aren’t educating their kids about avoiding ATM fees.

Parents, it’s time to teach your teens how to:

Find out what fee-free ATM options are available. Any decent bank or prepaid debit card offering will offer fee-free options for ATM withdrawals. Check the online help or the cardholder agreement. Good prepaid card providers will belong to a nationwide free ATM network, like MoneyPass or Allpoint. Often, the network symbol will be printed on the back of the card.

Locate fee-free ATM machines. A decent provider will provide an online locator or even a handy mobile app to help you find the nearest fee-free ATM.

Use fee-free ATM machines. Knowledge is one thing, applying it is another. Follow up to make sure your teen is avoiding fees.

Yes, I pay for a lot of my older teen’s everyday expenses. Even though he has savings from a summer job. And I’m happy to do so, like most parents.

But, I want to make absolutely sure my son knows exactly how much those everyday items cost. Even if I pay for them. Financial ignorance might feel like bliss now, but it sure won’t later.

How do I make sure he’s fully mindful of the money I’m spending?

Make him spend it first.

Make him itemize the expenses.

Make him formally request a reimbursement after subtracting out any items or portions of items we’ve agreed are his responsibility.

Only then will I send him money to cover — or partially cover — the transaction.

So what’s covered? I might fully cover toiletries, partially cover the gym membership, and not cover entertainment at all. You might have an entirely different set of rules. Do what makes sense for your situation.

No, your teens may not be able to afford everyday items yet, but they still need to learn exactly how much those items cost.

Make teens active participants in the everyday expenses you’re picking up. That way, they’ll know — and appreciate — the real value of a dollar when the day comes for everything to be on their nickel.

Saturday, August 13, 2016

You’ve heard the old adage: “The work expands to fill the time allotted.”

Well, something similar often holds for spending — especially for young consumers. The personal finance variant? “Spending expands to fill the amount allotted.”

Often, teens will spend money just because... it’s there.

Here’s a simple “game” to play with a teen who’s prone to “because it’s there” spending. It works well for any teen receiving a regular deposit into a spending account — whether it’s a weekly allowance, a summer paycheck, or maybe a little of both.

I call it the Sweep To Savings Game.

Each time a new deposit comes in, sweep the current balance of funds into a separate savings account first. In other words, don’t leave any unspent funds from the prior period hanging around. That way money never piles up from a previous period. It reduces the temptation of spending money on a whim, just because “it’s there.”

Sweeping the funds to saving each cycle also creates a nice a game dynamic. “See how much you can have left over in your account by the end of the week. Can you beat last week?”

“So that’s about $2.73 extra each time you bail on one of my sandwiches. Since there are about 180 school days in a year, that’s $491.40. So if you’d like to hand over almost $500 bucks from your summer savings, no problem!”

Use a Hybrid Card Strategy — Credit cards build a credit history, but they don’t prevent debt. Prepaid cards prevent debt, but they don’t build a credit history. So which one is best for your older teen?

Own The Whole Market — Jack Bogle reminds us that picking individual stocks is like finding needles in a haystack. Instead, follow this simple recipe for getting your teens in the investing hunt.

As you undoubtedly know by now, I’m on a mission to help parents like you teach kids to be more thoughtful and responsible with money. Back on January 7th, I challenged myself to write a brief new family finance tip to share with parents every day. 217 posts later, I’m still going strong and have attracted hundreds of subscribers.

To help get the word out to more parents, I’ve entered an annual personal finance blogging competition called the Plutus Awards. They’re accepting nominations now and voting closes in days. Winning would help me grow my audience for free family finance education significantly.

So, if you dig my youth financial literacy mission and find my writing to be helpful for your own family, please cast a quick electronic vote for my blog.

All you have to do is:

Visit the Plutus Awards nomination form by clicking HERE, or copy/paste the following URL into your browser:http://www.theplutusawards.com/nominate/?family=http://www.familyfinancefavs.com/&new=http://www.familyfinancefavs.com/

Fill in your name.

Fill in your email address. (Prevents ballot stuffing!)

Make sure my blog’s URL http://www.familyfinancefavs.com/ is entered in the Best New Personal Finance Blog category (first field in the list) and the Best Family Finance Blog category (7 up from the bottom). The link in step 1 should pre-fill those fields for you.

Scroll down to the bottom of the form, and click on the NOMINATE button.

Up for a little extra credit? Tweet the following (or share on your favorite social media):

I just nominated @FamFinanceFavs for the @PlutusAwards - Here's why you should too: http://www.familyfinancefavs.com/2016/08/help-me-spread-financial-knowledge-to-more-kids.html

Monday, August 8, 2016

Hey, your kid might just have something in common with Mark Zuckerberg after all!

Entrepreneurial talent? Well maybe... But I’m talking online security, or the lack of it.

Yes, even tech-savvy online wizards like the mighty Zuck have had their accounts hacked. In fact, hackers even took over Zuck’s Facebook account recently. How? Some speculate he was using the same password for Facebook as he used on another site — a site compromised in a data breach.

So, how can you figure out if your kid is like Zuck? Check out the Have I Been Pwned (HIBP) site maintained by security expert Troy Hunt. By the way, “pwned” — pronounced like “owned” with a p on the front — is a popular gaming slang used to taunt an opponent who is getting dominated (just ask your kids).

If you trust Troy like the Wall Street Journal does, you can type email addresses and userids into HIBP to see whether they’ve been swept up in a data breach. You won’t know for certain that you haven’t, but you’ll at least know if you have.

I checked up on mine. Yep, two hits: the LinkedIn breach and the Adobe breach. I checked my kids too.

What’s the lesson here? Teach your kids password security basics:

Never get complacent about account security. Realize we’re all vulnerable to having our online credentials compromised by a data breach — even the mighty Zuck.

Procrastinating on saving is always easy — especially when your kid has no idea how it could grow.

The next time that birthday check rolls in, whip up a little chart showing how much more valuable a check saved today is than ones saved successive years from now.

Here’s a chart for an 8 year old, a $20 birthday check, and a sweet 8% parent-paid interest rate courtesy of the Bank of Mom/Dad:

To create your own, just plug the relevant amounts into a compound interest calculator. Plug the birthday check amount into the Current Principal field, the number of years between now and the withdrawal date (maybe your kid’s projected high school or college graduation day) into the Years To Grow field, and your awesome Bank of Mom/Dad interest rate into the Interest Rate field.

Calculate the future value to see what saving the check now would be worth later. Then, rinse and repeat for successively fewer years of saving to see how delaying shrinks the final amount.

“Hey, looks like you could more than double your money by the end of high school if you save that check today.”

“Kids, if you enter $100 for present value, double that — or $200 — for future value, and 10 for the number of years, I bet you’ll need... oh let’s see... thinking, thinking... something close to 7.2% for an interest rate. How’d I do?”

“Wow, that’s expensive. Maybe I’ll just stick with what I have for now.”

Bingo!

The value of money can be difficult for kids to gauge. Not surprising. Most have limited exposure to real world paychecks and expenses. Converting prices to familiar work units will give your child some valuable perspective.

Monday, August 1, 2016

Four of the most magical words you’ll ever hear coming from a kid’s mouth.

I’m convinced that the genuine desire to help others is a leading indicator of future financial stability and overall contentment. It just seems logical that people who readily help others would make for more desirable employees, spend less on vanity items, and enjoy a stronger sense of gratitude.

It’s just a hunch. I can’t prove it. I’m still looking for the “helpfulness” equivalent of the famous Marshmallow experiment that links delayed gratification behavior in children to more successful life outcomes.

Even if I’m wrong, you have to admit: it sure feels good to raise a helpful kid. No?

So, how do we get our kids to utter the words “How can I help?” more often?

Utter them yourself. Frequently. With your kid in tow.

You’re dropping your kid off for soccer practice as the coach approaches with the big bag full of cones, pinnies, and balls.

“How can I help?” you say.

You’re picking your kid up at the Birthday party as the host is busily corralling the guests and gathering celebratory detritus.

“How can I help?” you say.

Your spouse is chatting with your kid in the kitchen while preparing dinner as you arrive from your daily commute.

“How can I help?” you say.

Your kid is sitting at the table engrossed in a video game as you fumble at the side door with an armload of groceries.

“How can I help?” your kid says.

Presto chango — magical!

P.S. Are you looking for effective ways to raise kids who are thoughtful and responsible with money? How can I help? Just hit reply to my weekly email.

Disclaimer

The content of FamilyFinanceFavs.com is for general information purposes only and does not constitute professional advice. Visitors to FamilyFinanceFavs.com should not act upon the content or information without first seeking appropriate professional advice.